This proposal represents the second competitive renewal of a Program Project Grant concerned with the developmental biology of the lung. The preceding grant period resulted in 24 manuscripts published or in press and 8 submitted manuscripts. The faculty is highly interactive, and many papers have been coauthored by project faculty. The theme of the grant remains the definition of molecular mechanisms regulating epithelial cell differentiation. Three of the four projects of the renewal continue themes from the previous grant period. One new project and several new faculty have been added. All of the projects use unique reagents and in vitro and in vivo models we have developed during the previous grant period. The proposal covers lung development from specification of epithelial cells of the initial lung bud through differentiation of type 1 cells and formation of lung alveoli in the early postnatal period. Project 6 explores the regulatory mechanisms by which the future lung epithelial cells are specified and the initial lung bud forms in the endodermal foregut. Project 5 examines the process by which FGF10 directs epithelial cells to form new airway branches in the fetal lung. Project 2 focuses on the adaptation of the lung epithelium to the oxidant stress at birth and the role that the epithelial cell glutathione system plays in regulating gene expression in the perinatal period. Project 1 deals with T1alpha, a type 1 cell-specific gene, its regulation and the role it plays in type 1 cell differentiation and alveolar formation. It also examines the possibility that T1alpha defines a population of bone marrow stem cells capable of engrafting as alveolar type 1 cells in the developing lung. There are three cores: administrative, structural and bioinformatic. The latter is a new core linked to the BU Bioinformatics Program in the College of Engineering. It provides gene expression arrays, bioinformatic expertise for interpreting complex patterns of gene expression, QRT-PCR, and new approaches to modeling epithelial cell gene regulatory pathways. While each project has its own focus, the theme of epithelial cell differentiation at different stages of fetal lung development, the extensive interactions of investigators, the shared reagents and in vitro and in vivo experimental systems, together with the core facilities, create a uniquely interactive and productive team of lung cell and molecular biologists and bioinformatics engineers.